290 F.3d 522 | 3rd Cir. | 2002
Before: SLOVITER and AMBRO, Circuit Judges,(cid:13) and POLLAK, District Judge**(cid:13) (Filed: May 17, 2002)(cid:13) Scott N. Stone (Argued)(cid:13) Patton Boggs(cid:13) Washington, D.C. 20037(cid:13) Attorney for Petitioner(cid:13) Commonwealth of Pennsylvania(cid:13) Arlen Specter (Argued)(cid:13) United States Senator(cid:13) United States Senate(cid:13) Washington, D.C. 20510(cid:13) Attorney for Petitioner(cid:13) Arlen Specter(cid:13) Theodore K. Kalick (Argued)(cid:13) Ellen D. Hanson(cid:13) General Counsel(cid:13) Craig M. Keats(cid:13) Deputy General Counsel(cid:13) Surface Transportation Board(cid:13) Office of General Counsel(cid:13) Washington, D.C. 20423(cid:13) _________________________________________________________________(cid:13) ** Hon. Louis H. Pollak, Senior United States District Judge for the(cid:13) Eastern District of Pennsylvania, sitting by designation.(cid:13) 2(cid:13) John P. Fonte(cid:13) Robert B. Nicholson(cid:13) Charles A. James(cid:13) Assistant Attorney General(cid:13) United States Department of Justice(cid:13) Antitrust Division(cid:13) Washington, D.C. 20530(cid:13) Attorneys for Respondents(cid:13) Surface Transportation Board and(cid:13) United States(cid:13) Carter G. Phillips (Argued)(cid:13) G. Paul Moates(cid:13) Jeffrey S. Berlin(cid:13) Virginia A. Seitz(cid:13) Sidley Austin Brown & Wood(cid:13) Washington, D.C. 20005(cid:13) Richard A. Allen(cid:13) Scott M. Zimmerman(cid:13) Adam F. Hulbig(cid:13) Zuckert, Scoutt & Rasenberger(cid:13) Washington, D.C. 20006(cid:13) J. Gary Lane(cid:13) Henry D. Light(cid:13) Joseph C. Dimino(cid:13) George A. Aspartore(cid:13) Jeffrey H. Burton(cid:13) John V. Edwards(cid:13) Norfolk Southern Corporation(cid:13) Norfolk, Virginia 23510(cid:13) Attorneys for Norfolk Southern(cid:13) Corporation and Norfolk Southern(cid:13) Railway Company,(cid:13) Intervenors/Respondents(cid:13) Richard S. Edelman (Argued)(cid:13) O’Donnell, Schwartz & Anderson(cid:13) Washington, D.C. 20036(cid:13) Attorney for the Unions(cid:13) Intervenors/Petitioners(cid:13) 3(cid:13) OPINION OF THE COURT(cid:13) SLOVITER, Circuit Judge:(cid:13) The Commonwealth of Pennsylvania and Arlen Specter,(cid:13) one of the United States Senators from Pennsylvania, joined(cid:13) by various interested unions,1 petition this court for review(cid:13) of the decision of the Surface Transportation Board ("STB"(cid:13) or "Board") rejecting their petition to cancel the planned(cid:13) shutdown by Norfolk Southern ("NS")2 of its Hollidaysburg(cid:13) Car Shops ("HCS") located outside Altoona, Pa.(cid:13) Before the Board, petitioners relied primarily on the(cid:13) representations condition that the Board had imposed on(cid:13) NS requiring it to "adhere to all of the representations" NS(cid:13) had made during the course of the proceeding by which it(cid:13) received approval to acquire Conrail properties, including(cid:13) the HCS. It will be evident to anyone who reviews the(cid:13) record that in the course of seeking the Board’s approval of(cid:13) NS’s acquisition of a portion of Conrail, which included the(cid:13) Hollidaysburg Car Shops, NS had represented before the(cid:13) Board and to various affected constituencies that it would(cid:13) keep the HCS open, that as a result NS was able to garner(cid:13) support from the Commonwealth, Senator Specter and(cid:13) others, that these supporters understood that the HCS(cid:13) would remain operational for more than two years, but that(cid:13) NS announced plans to close the HCS in less than that(cid:13) time, and that only the stay imposed by this court pending(cid:13) decision on this petition for review has kept the HCS open.(cid:13) Although the Board found that NS had represented that(cid:13) "the heavy repair shop at Hollidaysburg would continue to(cid:13) be utilized," the Board declined to cancel the shutdown,(cid:13) _________________________________________________________________(cid:13) 1. The intervening unions are Transport Workers Union of America,(cid:13) National Conference of Firemen and Oilers/SEIU, International(cid:13) Association of Machinists and Aerospace Workers, International(cid:13) Brotherhood of Boilermakers and Blacksmiths, International(cid:13) Brotherhood of Electrical Workers, Sheet Metal Workers’ International(cid:13) Association, and Transportation Communications International Union.(cid:13) 2. Norfolk Southern Corporation and Norfolk Southern Railway Company(cid:13) participated as intervenors in this appeal.(cid:13) 4(cid:13) concluding that NS’s representations did not require(cid:13) continued operation in the face of "deteriorating economic(cid:13) conditions." It is from this order that petitioners seek(cid:13) review. We regret that on this record this court is powerless(cid:13) to grant the petitions.(cid:13) I.(cid:13) FACTS & PROCEDURAL POSTURE(cid:13) The Surface Transportation Board is the independent(cid:13) federal agency established by Congress within the(cid:13) Department of Transportation and has the responsibility for(cid:13) the economic regulation of the country’s railroads. 3 The(cid:13) Board has exclusive authority over the approval and(cid:13) supervision of railroad mergers. See, e.g., 49 U.S.C.(cid:13) S 11321 (2001); Union R.R. v. United Steelworkers of(cid:13) America, 242 F.3d 458, 466 (3d Cir. 2001).(cid:13) Congress has prescribed a number of factors for the(cid:13) Board to consider in the exercise of its authority to approve(cid:13) mergers. Those factors include the merger’s effect on the(cid:13) adequacy of transportation available to the public, the(cid:13) impact on the public interest of the inclusion or exclusion(cid:13) of other carriers, the total fixed charges from the merger,(cid:13) the interest of the railroad employees affected by the(cid:13) merger, and the effect of the merger on competition(cid:13) between rail carriers. 49 U.S.C. S 11324(b). Thus it was to(cid:13) the Board that the prospective acquirers of Conrail looked(cid:13) for ultimate approval.(cid:13) Initially, two railroad companies, Norfolk Southern(cid:13) Corporation and Norfolk Southern Railway Company(cid:13) _________________________________________________________________(cid:13) 3. See Marshall J. Breger & Gary J. Edles, Established by Practice: The(cid:13) Theory and Operation of Independent Federal Agencies , 52 Admin. L.(cid:13) Rev. 1111, 1288 (2000) (citing 49 U.S.C. SS 701-706, 721-27 (Supp. IV(cid:13) 1998)). "The STB is the successor agency to the Interstate Commerce(cid:13) Commission (ICC), which was abolished by Congress in 1995. That act(cid:13) also established the STB, and provided that it would perform all the(cid:13) functions that previously were performed by the ICC as of the effective(cid:13) date of the act." Friends of the Atglen-Susquehanna Trail, Inc. v. Surface(cid:13) Transp. Bd., 252 F.3d 246, 250 n.1 (3d Cir. 2001) (citations omitted).(cid:13) 5(cid:13) (collectively "NS") and CSX Corporation and CSX(cid:13) Transportation, Inc. (collectively CSX), had battled over the(cid:13) extent to which either entity would acquire Conrail, with(cid:13) each company publicly insisting its acquisition of Conrail(cid:13) would better serve the interests of influential(cid:13) constituencies. For example, both CSX and NS suggested(cid:13) they would consider moving their headquarters to(cid:13) Philadelphia. Henry J. Holcomb, Norfolk Southern Launches(cid:13) Hostile Bid for Conrail, Phila. Inquirer, Oct. 24, 1996.(cid:13) According to commentators, winning the congressional(cid:13) support of the Pennsylvania delegation was a key(cid:13) component of NS’s strategy. See, e.g., Don Phillips, Norfolk(cid:13) Southern Tops CSX’s Bid for Conrail; $9.1 Billion Offer is(cid:13) Likely to Start a Messy Battle, Wash. Post, Oct. 24, 1996,(cid:13) at E1. Bud Shuster, Altoona’s U.S. Congressman, and(cid:13) then-chairman of the House Transportation and(cid:13) Infrastructure Committee, announced he would "launch[ ] a(cid:13) ‘bloody, bruising legislative battle’ if need be to protect the(cid:13) 1,300 jobs [at Conrail’s Altoona-area shops]." Tom Gibb,(cid:13) Bud Shuster Vows to Fight to Protect Railroad Jobs ,(cid:13) Pittsburgh Post-Gazette, Nov. 2, 1996, at C-5.(cid:13) During this period and after it joined forces with CSX to(cid:13) seek approval of the Conrail transaction, NS made a(cid:13) number of representations regarding the Hollidaysburg Car(cid:13) Shops, located near Altoona, Pennsylvania. NS’s CEO,(cid:13) David Goode, publicly stated that "Conrail’s locomotive and(cid:13) car repair shops, which make up the lion’s share of the(cid:13) economy of Altoona, Pa., would grow under Norfolk(cid:13) Southern." Holcomb, supra. NS bought advertising in the(cid:13) New York Times representing that "Norfolk Southern is(cid:13) committed to continuing to operate Conrail’s Hollidaysburg(cid:13) Car Shop . . . and will promote employment there." App. at(cid:13) 358. NS issued a press release to the same effect. In a fact(cid:13) sheet issued around the time NS filed its Conrail(cid:13) application, NS indicated its intent to invest an(cid:13) " ‘[e]stimated $4 million in capital improvements at [the](cid:13) Hollidaysburg shop.’ " CSX Transp. & CSX Transp., Inc.,(cid:13) STB Fin. Docket No. 33388, slip op. at 5 (STB May 21,(cid:13) 2001) (hereinafter Decision No. 186) (alterations in original).(cid:13) However, when Goode testified before a subcommittee of(cid:13) the U.S. Senate’s Committee on Appropriations, he stated(cid:13) 6(cid:13) only that "we are in a position of not only being able to give(cid:13) assurances that we will keep [the Hollidaysburg and(cid:13) Altoona shops] and keep them operating, we are going to(cid:13) need them." Conrail Merger Implications: Hearing Before a(cid:13) Subcomm. of the Senate Comm. on Appropriations, 105th(cid:13) Cong. 49 (1998) (statement of David R. Goode, President(cid:13) and CEO, Norfolk Southern). But then-influential(cid:13) Representative Shuster reported that he had received(cid:13) "strong verbal reassurances that the [Altoona-area] shops(cid:13) will remain . . . at least at the current level." Gibb, supra.(cid:13) In its application before the STB, NS observed that the(cid:13) Altoona/Hollidaysburg shops were "excellent,""while NS’s(cid:13) comparable facilities are in Roanoke, Virginia." App. at 378.(cid:13) According to NS, "important efficiencies can be gained by(cid:13) concentrating different types of mechanical work at each(cid:13) location." Id. NS concluded by noting that " ‘insourcing’(cid:13) provides another opportunity to maximize utilization of the(cid:13) system shops at Altoona/Hollidaysburg and Roanoke. .. .(cid:13) CSX plans to use NS’s services at Altoona/Hollidaysburg(cid:13) for at least a portion of its Conrail car and locomotive(cid:13) fleets." Id. NS indicated it would market the services offered(cid:13) by the HCS in order to expand the opportunities there.(cid:13) Decision No. 186, slip op. at 5. In the operating plan NS(cid:13) submitted as part of the merger approval process, NS again(cid:13) represented it would invest four million dollars in capital(cid:13) improvements to the HCS.(cid:13) Representative Shuster, Pennsylvania’s then-Governor(cid:13) Ridge, and the Pennsylvania Senate and House(cid:13) Transportation Committees all expressed support for NS’s(cid:13) acquisition of Conrail, explicitly founding their support on(cid:13) the representations made by NS regarding the(cid:13) Hollidaysburg shop. Decision No. 186, slip op. at 6; CSX(cid:13) Transp. & CSX Transp., Inc., 3 S.T.B. 196 (Decision No. 89)(cid:13) Appendix K, slip op. at 321 (July 20, 1998) (hereinafter(cid:13) Decision No. 89). On July 20, 1998, the STB approved the(cid:13) acquisition and division of Conrail by NS and CSX.(cid:13) The Board "approv[ed] the primary application in its(cid:13) entirety," Decision No. 89, slip op. at 17, observing the(cid:13) application was "endorsed by more than 2,700 parties,(cid:13) including more than 2,200 shippers, more than 350 public(cid:13) officials, and more than 80 railroads," id. at 12. The Board(cid:13) 7(cid:13) found that the merger, as conditioned by its decision(cid:13) approving the transaction, "is consistent with the public(cid:13) interest; (b) . . . the . . . transaction will not adversely affect(cid:13) the adequacy of transportation to the public; (c) . . . failure(cid:13) to include other railroads will not adversely affect the(cid:13) public interest; . . . [and] (e) . . . the interests of employees(cid:13) affected by the proposed transaction do not make such(cid:13) transaction inconsistent with the public interest, and any(cid:13) adverse effect will be adequately addressed by the(cid:13) conditions imposed." Id. at 166.(cid:13) The statute gives the Board the authority to "impose(cid:13) conditions governing" merger authorizations. 49 U.S.C.(cid:13) S 11324(c). The Board has "extraordinarily broad discretion"(cid:13) under that section to fashion conditions to such(cid:13) transactions to ensure that the public interest standard is(cid:13) satisfied. S. Pac. Transp. Co. v. ICC, 736 F.2d 708, 721(cid:13) (D.C. Cir. 1984); see also Grainbelt Corp. v. Surface Transp.(cid:13) Bd., 109 F.3d 794, 798 (D.C. Cir. 1997).(cid:13) In approving the merger, the Board imposed a number of(cid:13) conditions on NS and CSX. The condition of relevance here(cid:13) provided that "Applicants must adhere to all of the(cid:13) representations they made during the course of this(cid:13) proceeding, whether or not such representations are(cid:13) specifically referenced in this decision." Decision No. 89,(cid:13) slip op. at 176. The Board reiterated this condition a(cid:13) number of times in its decision. See, e.g., id. at 105(cid:13) ("[Certain parties seeking the imposition of conditions] . . .(cid:13) ask that we ‘note for the record’ the settlement agreement(cid:13) they have entered into with NS. As we have noted elsewhere(cid:13) in this decision, we are requiring applicants to adhere to(cid:13) any representations made to parties in this case."); id. at 17(cid:13) n.26 ("CSX and NS have made, both in their written(cid:13) submissions and also at the oral argument . . . numerous(cid:13) representations to the effect that certain issues will be(cid:13) addressed, certain services will be provided, and so on.(cid:13) Some of these representations are specifically referenced in(cid:13) this decision; many however, are not specifically referenced.(cid:13) We think it appropriate to note, and to emphasize, that(cid:13) CSX and NS will be required to adhere to all of the(cid:13) representations made on the record during the course of(cid:13) this proceeding, whether or not such representations are(cid:13) specifically referenced in this decision.").(cid:13) 8(cid:13) On June 1, 1999, following the approval by the Board of(cid:13) the Conrail split, NS began operating various Conrail lines.(cid:13) In November of 2000, less than a year and a half after it(cid:13) began operating the HCS, NS announced its intention to(cid:13) close that facility. Congressman Shuster, who asserted that(cid:13) he had been given personal assurances by NS that the HCS(cid:13) would be retained, scheduled hearings on the matter. NS’s(cid:13) CEO then advised Shuster via letter that it would not(cid:13) continue with the planned closure. Shortly thereafter, in(cid:13) January 2001, Shuster resigned, "saying he did not want to(cid:13) serve after being removed as chairman of the powerful(cid:13) Transportation Committee because of GOP term limits."(cid:13) Shuster Name Will Remain in Congress, Lewistown Sentinel(cid:13) (May 16, 2001), at http://www.lewistownsentinel.com(cid:13) /news_05161.htm. On February 21, 2001, NS announced(cid:13) the closure of the HCS, effective approximately September(cid:13) 1, 2001.(cid:13) Promptly thereafter, the unions and the Commonwealth(cid:13) of Pennsylvania filed petitions to the Board seeking an(cid:13) order barring the closure. The Board ultimately issued(cid:13) three decisions in response to the petitions. First, the(cid:13) Board issued Decision No. 186 on May 21, 2001, "directing(cid:13) . . . [NS] to show why the Board should not order NS to(cid:13) cancel a proposed shut-down of its Hollidaysburg Car(cid:13) Shops and to keep them open at least at present capacity(cid:13) for a significant period of time beyond September 1, 2001,(cid:13) in view of representations made in the Conrail proceeding,(cid:13) or made elsewhere, upon which involved parties clearly(cid:13) relied in formulating positions of support for the Conrail(cid:13) transaction." Decision No. 186, slip op. at 1.(cid:13) The Board found that NS had "indicated" that"the heavy(cid:13) repair shop at Hollidaysburg would continue to be utilized."(cid:13) Id. at 5. According to the Board, "[t]hroughout the course of(cid:13) the Conrail proceeding, NS indicated on numerous(cid:13) occasions that it was committed to operating the(cid:13) Hollidaysburg Car Shops." Id. The Board found that "NS’s(cid:13) representations vis-a-vis the Hollidaysburg Car Shops were(cid:13) intended to be relied upon, and were relied upon, in(cid:13) connection with the positions taken by various parties in(cid:13) the Conrail proceeding." Id. at 6. Thus, the Board observed,(cid:13) "in the present circumstances, the customary flexibility that(cid:13) 9(cid:13) we accord the projections of merger applicants must give(cid:13) way to the representations by NS to keep the Hollidaysburg(cid:13) Car Shops open and operating -- statements upon which(cid:13) people clearly relied in formulating positions of support for(cid:13) the Conrail transaction." Id. at 7. The Board concluded by(cid:13) stating that "[t]he Board takes very seriously statements(cid:13) and comments made by parties in all matters that come(cid:13) before us. We will continue to be vigilant in doing what we(cid:13) can to ensure that representations made by parties to our(cid:13) proceedings are actually honored." Id.(cid:13) Petitioners rely particularly on the following statements(cid:13) in Decision No. 186. First, the Board observed,"[w]e agree(cid:13) that NS never committed to keeping the shops open in(cid:13) perpetuity, but it is now only 2 years since the date . . . on(cid:13) which Conrail’s assets were divided between CSX and NS."(cid:13) Id. at 6. The Board also suggested that the representations(cid:13) condition would not be waived based on new events that(cid:13) were foreseeable to NS at the time it made its(cid:13) representations: "Regarding NS’s claim that it now has(cid:13) excess freight car repair capacity, if NS does indeed have(cid:13) excess freight car repair capacity today, this is an excess(cid:13) that could have been considered in 1997-1998 when(cid:13) commitments were made." Id. at 6-7.(cid:13) Commissioner Burkes dissented from the Board’s(cid:13) decision, complaining that the Board had never before(cid:13) strictly enforced a "representations condition." Id. at 9.(cid:13) Commissioner Burkes cited examples where,(cid:13) notwithstanding a similar condition, the Board had not(cid:13) required former merger applicants to strictly comply with(cid:13) their earlier representations to make certain investments.(cid:13) He noted that the Board encouraged NS to deviate from its(cid:13) operating plan in Buffalo, New York by changing its(cid:13) operations there and making the considerably greater(cid:13) investment of $12 million than that it had originally(cid:13) anticipated. Indeed, Burkes observed that, in retrospect,(cid:13) "perhaps, the Board should have only allowed NS to spend(cid:13) only $8 million in Buffalo and require it to spend $4 million(cid:13) in Hollidaysburg." Id. In another proceeding, the Board had(cid:13) not required Union Pacific to make investments it had(cid:13) represented it would make because the Board "recognized(cid:13) ‘there is no requirement that a merger applicant actually(cid:13) 10(cid:13) make investments in the exact places or at the precise(cid:13) dollar amount that it predicts it will spend in its(cid:13) application.’ " Id.; see also Union Pacific Corp., STB Fin.(cid:13) Docket No. 32760 (Sub-No. 21), slip op. at 13 (Dec. 13,(cid:13) 2000) (same).(cid:13) Commissioner Burkes could discern no difference(cid:13) between the enforcement of investment representations and(cid:13) the enforcement of a representation to maintain HCS.(cid:13) Burkes concluded that "strict enforcement of the(cid:13) ‘representations condition’ would be a new standard that(cid:13) should not be applied retroactively to NS or to any other(cid:13) railroad. . . . If the Board intends this to be a new standard,(cid:13) then it should be addressed in our new railroad merger(cid:13) rules which will be issued shortly by the Board." Decision(cid:13) No. 186, slip op. at 10.4(cid:13) Four months later, in Decision No. 198, issued(cid:13) September 18, 2001, the Board denied the petition to order(cid:13) NS to keep the HCS open. CSX Transp. & CSX Transp., Inc.,(cid:13) STB Finance Docket No. 33388, slip op. at 1, (STB Sept.(cid:13) 18, 2001) (hereinafter Decision No. 198). The Board(cid:13) observed that "deteriorating economic conditions" had(cid:13) forced NS to scale back its ambitions on a number of(cid:13) fronts, including a reduction in its dividend for the first(cid:13) time in its history, a 25% reduction in its management(cid:13) workforce, and a contraction of its fleet by 12,000 rail cars.(cid:13) Id. at 2 & n.4. Furthermore, the Board noted NS’s(cid:13) contention that, when analyzed as a stand-alone facility,(cid:13) the HCS was losing up to seven million dollars annually. Id.(cid:13) at 3. Keeping open the HCS might also require NS to shut(cid:13) down other facilities. "[F]avoring the HCS and its employees(cid:13) _________________________________________________________________(cid:13) 4. An additional instance, not cited by Commissioner Burkes but pointed(cid:13) to by the United States in its brief, is the Board’s decision in CSX Corp.(cid:13) & CSX Transp., Inc., STB Fin. Docket No. 33388, Decision No. 5, 2001(cid:13) STB LEXIS 67, at *49-50 (STB Feb. 2, 2001). In that Decision, the Board(cid:13) rejected an objection to CSX’s failure to implement"commitments"(cid:13) outlined in its operating plan, observing, "The plans . . . are applicants’(cid:13) best projections regarding what traffic they believe they can profitably(cid:13) serve. Those operating plans do not provide a basis in and of themselves(cid:13) for relief at this time." Id. at *49-50. In short, the plans need not be(cid:13) "enforced without variation." Id. at 49.(cid:13) 11(cid:13) could work to disfavor other NS employees and locations."(cid:13) Id. at 7.(cid:13) On the other hand, the Board observed that NS had(cid:13) "presented nothing here to change our prior conclusion that(cid:13) the carrier’s representations both before and during the(cid:13) merger process could not help but reasonably lead State(cid:13) and local interests to believe that NS would keep the shops(cid:13) open and to rely on that commitment in determining how(cid:13) they participated in the merger process." Id. at 6. In light of(cid:13) the reliance on NS’s representation to keep the HCS open,(cid:13) the Board "supplement[ed] the labor protective conditions(cid:13) . . . imposed in Decision No. 89." Id. at 7.(cid:13) In its final decision, Decision No. 200, issued on October(cid:13) 4, 2001, the Board rejected the request by the(cid:13) Commonwealth and the unions for a stay pending judicial(cid:13) review. CSX Corp. & CSX Transp. Inc., STB Fin. Docket No.(cid:13) 33388, slip op. at 1 (STB Oct. 4, 2001) (hereinafter Decision(cid:13) No. 200). There, the Board observed that in Decision No.(cid:13) 198, "we . . . determined that NS did not represent that it(cid:13) would keep the HCS open indefinitely, without regard to(cid:13) business and economic conditions." Id. at 2.(cid:13) The petitioners filed this petition for review. They sought,(cid:13) and we granted, a stay. At NS’s request, we expedited the(cid:13) proceeding.(cid:13) II.(cid:13) JURISDICTION(cid:13) This court has jurisdiction to review the Board’s(cid:13) decisions pursuant to 28 U.S.C. S 2342(5) (2001). The(cid:13) petition for review was timely filed.(cid:13) III.(cid:13) DISCUSSION(cid:13) Petitioners raise two issues in this case. They contend (1)(cid:13) that the Board’s decision under review was arbitrary and(cid:13) capricious, and (2) that the Board’s decision was(cid:13) 12(cid:13) unreasonable and standardless and/or constituted an(cid:13) abuse of its discretion. The standard of review is(cid:13) established by the Administrative Procedure Act (APA), 5(cid:13) U.S.C. S 706(2)(A) (2001), which provides that the reviewing(cid:13) court shall "hold unlawful and set aside agency action,(cid:13) findings, and conclusions found to be 2 (A) arbitrary,(cid:13) capricious, an abuse of discretion, or otherwise not in(cid:13) accordance with law."(cid:13) Petitioners do not, nor could they reasonably, argue that(cid:13) the Board’s decision not to enjoin NS from closing the HCS(cid:13) is not in accordance with law. Congress committed to the(cid:13) Board the exclusive authority to approve and authorize(cid:13) consolidations or mergers of rail carriers, and this authority(cid:13) encompasses supervision of those mergers. 49 U.S.C.(cid:13) S 11321.(cid:13) There is no contention that the Board failed to follow the(cid:13) required procedures. Instead, petitioners argue that the(cid:13) Board’s decision was arbitrary and capricious. They list six(cid:13) reasons why it should be so characterized. They are that(cid:13) the decision fails to show a rational connection between the(cid:13) facts found and the choice made, the Board relied on(cid:13) irrelevant factors, it failed to articulate a standard(cid:13) governing when railroad merger applicants will be held to(cid:13) their promises, it failed to explain why the adverse events(cid:13) cited were not foreseeable, it failed to treat its decision as(cid:13) to the HCS as a departure from its earlier policy holding NS(cid:13) and other merging railroads to all of their promises and(cid:13) representations, and it failed to consider relevant and(cid:13) important factors.(cid:13) Where the Board is interpreting and applying conditions(cid:13) it has promulgated according to its statutory authority, its(cid:13) action is accorded the highest deference. See, e.g., CSX(cid:13) Transp., Inc. v. Surface Transp. Bd., 75 F.3d 696, 702 (D.C.(cid:13) Cir. 1996) ("The [Board]’s decision interpreting the(cid:13) conditions that it announced in Oregon Short Line is(cid:13) entitled to considerable deference, ‘even greater deference’(cid:13) than when an agency interprets a statutory term.") (citation(cid:13) omitted); Nat’l Motor Freight Traffic Ass’n v. ICC, 590 F.2d(cid:13) 1180, 1184 (D.C. Cir. 1978) ("We accord particular(cid:13) deference when, as here, the subject of review is the(cid:13) agency’s interpretation . . . of its own order."). Notably, the(cid:13) 13(cid:13) Board’s imposition of conditions to mergers has been(cid:13) characterized as the kind of " ‘judgmental or predictive’(cid:13) conclusion with respect to which judicial deference to(cid:13) agency expertise is especially appropriate." S. Pac. Transp.(cid:13) Co. v. ICC, 736 F.2d 708, 720-21 (D.C. Cir. 1984) (citation(cid:13) omitted). Given the Board’s "extraordinarily broad(cid:13) discretion to impose . . . conditions" pursuant to a merger(cid:13) "the courts have appropriately given the [Board’s] selection(cid:13) of such conditions great deference." Id. at 721. In(cid:13) determining whether the Board was arbitrary and(cid:13) capricious in its interpretation of such a condition, our(cid:13) review is particularly deferential, implicating, as it does,(cid:13) both the Board’s expertise in imposing the condition and(cid:13) our customary deference to an agency’s interpretations of(cid:13) directives which it has itself promulgated.(cid:13) It is evident that at the heart of the petitioners’ argument(cid:13) is their position that the representations condition that the(cid:13) Board imposed on NS in Decision No. 89 bound NS to the(cid:13) representations it made to keep the HCS open. Therefore,(cid:13) before considering the petitioners’ contention that the(cid:13) Board failed to apply the representations condition, it is(cid:13) necessary to determine the nature of NS’s representations.(cid:13) Although the representations condition in Decision No. 89(cid:13) by its terms covers only "representations made on the(cid:13) record during the course of this proceeding [the Conrail(cid:13) acquisition]," neither the Board nor the parties have(cid:13) suggested that there is a significant distinction between the(cid:13) on-the-record representations and the representations(cid:13) made by NS in public statements and advertisements in the(cid:13) course of its campaign to seek Board approval of the(cid:13) Conrail acquisition.(cid:13) Petitioners conceded at oral argument before us that NS(cid:13) never said that it committed to operate the HCS in(cid:13) perpetuity. Transcript of Oral Argument February 5, 2002(cid:13) at 12 (hereinafter Tr.). Nor have they pointed us to any(cid:13) commitment to operate the HCS for any defined time.(cid:13) Instead of identifying any specific statement or(cid:13) representation, petitioners’ counsel referred us to the body(cid:13) of statements made by NS referred to above. Mr. Edelman,(cid:13) counsel for the unions, stated:(cid:13) 14(cid:13) [I]t’s the press release. It’s the statement to Senator(cid:13) Specter. It’s the statements to the Governor. It’s the(cid:13) statements to Congressman Shuster. It’s newspaper(cid:13) ads all over the State that they took out, ["]dear(cid:13) employees,["] you know.(cid:13) Tr. at 19.(cid:13) The Board has accepted both the contentions that NS(cid:13) made representations and that these representations were(cid:13) covered by the representations condition that the Board(cid:13) imposed. In Decision No. 186, which required NS to show(cid:13) cause why the Board should not cancel the announced(cid:13) HCS shut-down, the Board referred to "NS’s representations(cid:13) vis-a-vis the Hollidaysburg Car Shops." However, the Board(cid:13) did not describe the nature of NS’s representation or "its(cid:13) commitment" other than in vague terms. For instance, it(cid:13) observed that "in the present circumstances, the customary(cid:13) flexibility that we accord the projections of merger(cid:13) applicants must give way to the representations by NS to(cid:13) keep the Hollidaysburg Car Shops open and operating ."(cid:13) Decision No. 186, slip op. at 7 (emphasis added). In(cid:13) addition, the Board used language that appeared to reject(cid:13) NS’s proffered explanations for the shut-down, stating,(cid:13) "[W]e cannot accept, without further explanation, the(cid:13) implicit argument that NS’s commitments vis-a vis the(cid:13) Hollidaysburg Car Shops were intended to remain in effect(cid:13) only as long as the economy remained as it was at that(cid:13) time. Regarding NS’s claim that it now has excess freight(cid:13) car repair capacity, if NS does indeed have excess freight(cid:13) car repair capacity today, this is an excess that could have(cid:13) been considered in 1997-1998 when commitments were(cid:13) made." Id. at 6-7.(cid:13) In response to the direction to show cause in Decision(cid:13) No. 186, NS argued that deteriorating economic conditions(cid:13) forced it to rethink its operations and to take various steps(cid:13) to reduce costs, increase efficiency, and restructure the(cid:13) company to enable it to perform profitably. Among those(cid:13) steps, but far from the only one, was the closure of the(cid:13) HCS, which NS reported had lost almost seven million(cid:13) dollars in the year 2000.(cid:13) Referring to these changed economic conditions, the(cid:13) Board, less than four months afer Decision No. 186, issued(cid:13) 15(cid:13) Decision No. 198, in which it held it would not require NS(cid:13) to keep the HCS open after the announced closing date of(cid:13) October 1, 2001. In so holding, the Board did not backtrack(cid:13) on its prior acknowledgment that NS had made(cid:13) representations. After reviewing the petitioners’ arguments(cid:13) (which are substantially the same as those before us) and(cid:13) the positions of other interested entities, the Board began(cid:13) its Discussion section with the statement:(cid:13) It is evident that, during the course of and in(cid:13) connection with the Conrail proceeding, NS made a(cid:13) general commitment to the Altoona/Hollidaysburg area(cid:13) and to the employees of the HCS and the JLS [nearby(cid:13) Juniata Locomotive Shop] that it would make these(cid:13) shops an important part of its post-transaction(cid:13) operations.(cid:13) Decision No. 198, slip op. at 6. The Board described the(cid:13) commitment as follows:(cid:13) This commitment was, in essence, both a commitment(cid:13) to the future economic well-being of the area and a(cid:13) commitment to the well-being of the individual(cid:13) employees of the HCS and the JLS, and it is supported(cid:13) by statements in the record and confirmed by other(cid:13) representations made by NS officials at the highest(cid:13) levels. NS has presented nothing here to change our(cid:13) prior conclusion that the carrier’s representations both(cid:13) before and during the merger process could not help(cid:13) but reasonably lead State and local interests to believe(cid:13) that NS would keep the shops open and to rely on that(cid:13) commitment in determining how they participated in(cid:13) the merger process. Decision No. 186 at 6.(cid:13) Id. (citation omitted). Finally, on the nature of the(cid:13) commitment the Board concluded that "NS kept its(cid:13) commitment by operating the HCS and the JLS" for more(cid:13) than two years. Id.(cid:13) Petitioners sought a stay pending judicial review. In(cid:13) Decision No. 200, which was the Board’s final word on the(cid:13) subject of the representations made, the Board described(cid:13) Decision No. 198 as "determin[ing] that NS had indeed(cid:13) made commitments to the Altoona/Hollidaysburg area and(cid:13) to HCS employees -- which were relied upon by various(cid:13) 16(cid:13) local and statewide interests in determining how they would(cid:13) participate in the merger process -- that NS would make(cid:13) the HCS and the nearby Juniata Locomotive Shop (JLS)(cid:13) important parts of its post-transaction operations."(cid:13) Decision No. 200, slip op. at 2. Significantly, the Board(cid:13) stated that the "sole issue before us [in Decision No. 198](cid:13) was whether NS violated our condition that the carrier(cid:13) adhere to its representations, and we found no indication in(cid:13) the record of the Conrail proceeding, or elsewhere, that NS(cid:13) had represented that it would continue HCS operations(cid:13) irrespective of changing business conditions." Id. at 3(cid:13) (emphasis added).(cid:13) Our review of the record leads us to the same conclusion.(cid:13) Although officials of the Commonwealth, the local(cid:13) communities, the employees, and influential public figures,(cid:13) such as Senator Specter, may have been led to understand(cid:13) otherwise, we can find no representation by NS that it(cid:13) intended to operate HCS indefinitely without regard to(cid:13) business conditions. A careful parsing of the statements by(cid:13) NS on the record shows it made a number of disclaimers(cid:13) during the application process. For example, NS had stated,(cid:13) "Applicants have not determined whether any other(cid:13) locomotive or car shops or facilities, other than the ones(cid:13) specified in the Operating Plan, will be closed." App. at 848.(cid:13) In its operating plan, NS observed, "The Operating Plans(cid:13) are best projections, which are not binding on the(cid:13) Applicants. . . . These plans . . . cannot anticipate all of the(cid:13) changes that may be necessary to operate Conrail’s assets(cid:13) in an efficient manner." App. at 848. NS further stated,(cid:13) "After NS acquires its portion of Conrail, business(cid:13) conditions, revenue and traffic growth, efficiency of(cid:13) operations and similar factors will be evaluated to(cid:13) determine needs for car and locomotive shops. No timetable(cid:13) has been set for this determination." App. at 848.(cid:13) The commitment, as NS now asserts, was a general one.(cid:13) Counsel for the Commonwealth conceded that there is a(cid:13) mechanism in which a representation such as that made in(cid:13) this case could have been included in a legally binding(cid:13) commitment. Tr. at 6-7. In fact, there was a written(cid:13) agreement between NS and the Commonwealth in which NS(cid:13) undertook certain action but that agreement did not cover(cid:13) 17(cid:13) the HCS. Thus, the events that precipitated the petitions(cid:13) before us may serve as an object lesson to other states and(cid:13) communities.(cid:13) The Board was not arbitrary in concluding that the(cid:13) representations condition did not bind NS to its(cid:13) commitment to make the HCS an important part of its(cid:13) post-transaction operations. It follows that the arguments(cid:13) that petitioners make that are premised on their contention(cid:13) that the Board was arbitrary in failing to require NS to(cid:13) comply with its representations with respect to the HCS(cid:13) necessarily fail in light of our determination that the Board(cid:13) was not arbitrary in determining that NS fulfilled its(cid:13) representations under the circumstances before it.(cid:13) However, the petitioners also argue that the Board(cid:13) considered irrelevant factors in reaching its decision and,(cid:13) correlatively, that it failed to consider other relevant and(cid:13) important factors. This argument merits careful attention(cid:13) because administrative agencies have an obligation to act(cid:13) only after consideration of all relevant factors. See, e.g.,(cid:13) Motor Vehicle Mfrs.’ Ass’n v. State Farm Mut. Auto. Ins. Co.,(cid:13) 463 U.S. 29, 43 (1983) (observing an agency acts arbitrarily(cid:13) and capriciously when it "relie[s] on factors which Congress(cid:13) had not intended it to consider [or] entirely failed to(cid:13) consider an important aspect of the problem"); see also(cid:13) Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S.(cid:13) 402, 416 (1971) (observing that to determine whether an(cid:13) agency has acted arbitrarily and capriciously, "the court(cid:13) must consider whether the decision was based on a(cid:13) consideration of the relevant factors").(cid:13) The Board was cognizant of the adverse effect that the(cid:13) closure of the HCS would have on the HCS employees. To(cid:13) ameliorate the harsh effects of the closure of the HCS, the(cid:13) Board imposed labor protective conditions in addition to(cid:13) those that ordinarily accompany approval of a merger.(cid:13) When the Board authorizes a merger it is required by(cid:13) statute to safeguard the interests of railroad employees who(cid:13) are adversely affected by the transaction. 49 U.S.C.(cid:13) S 11326. The standard labor protections that the Board(cid:13) imposed are the conditions set forth in New York Dock(cid:13) Railway-Control-Brooklyn Eastern District Terminal , 360(cid:13) I.C.C. 60, 84-90 (1979). The New York Dock conditions(cid:13) 18(cid:13) entitle employees who are transferred as a result of the(cid:13) transaction to reimbursement for moving expenses and(cid:13) losses from the sale of a home, and up to six years of(cid:13) income protection for those employees who are displaced or(cid:13) dismissed. Id. at 84, 86-88. In exchange for these benefits,(cid:13) rail carriers may transfer work and employees as necessary(cid:13) to carry out the transaction notwithstanding existing labor(cid:13) agreements, although "rates of pay, rules, working(cid:13) conditions and all collective bargaining and other rights,(cid:13) privileges and benefits . . . under applicable laws and/or(cid:13) existing collective bargaining agreements . . .[are](cid:13) preserved unless changed by future collective bargaining(cid:13) agreements." Id. at 84. In order for an affected employee to(cid:13) obtain benefits under New York Dock in the event of a(cid:13) dispute, s/he must establish that the adverse effect was(cid:13) caused by the Board-approved transaction itself, and not by(cid:13) some other event. Id. at 88.(cid:13) In this case, the Board supplemented the standard New(cid:13) York Dock conditions that it had imposed on the Conrail(cid:13) transaction "by providing that current HCS employees who(cid:13) are not afforded the opportunity to transfer to new(cid:13) employment elsewhere on NS, or cannot exercise their(cid:13) seniority to obtain such a position, will be deemed to be(cid:13) eligible, upon dismissal, to New York Dock’s economic(cid:13) benefits." Decision No. 198, slip op. at 7-8. In other words,(cid:13) the Board dispensed with the standard New York Dock(cid:13) requirement that employees establish that the transaction(cid:13) caused their dismissal or displacement. The Board also(cid:13) extended "automatic certification" for New York Dock(cid:13) benefits to all transferring HCS employees. Moreover, in(cid:13) response to the unions’ argument that the Board imposed(cid:13) only that which NS had already offered, NS notes that it(cid:13) had only previously offered the New York Dock conditions to(cid:13) a few of the unions but that the Board directed that they be(cid:13) provided to all of the unions. Tr. at 44.(cid:13) The petitioners acknowledge the ameliorative effect of the(cid:13) labor conditions but argue that the adverse effect of the(cid:13) shut-down would be heavily felt on the state and on the(cid:13) Hollidaysburg/Altoona community. NS notes that it(cid:13) undertook to make certain investments within(cid:13) Pennsylvania, such as committing, inter alia, to provide(cid:13) 19(cid:13) cash to the city and state to attract Kvaerner ASA to the(cid:13) Philadelphia Navy Yard, to invest in rail development(cid:13) programs in Philadelphia and throughout Pennsylvania, to(cid:13) create certain rail-related jobs, to make over $235,000,000(cid:13) of capital improvement expenditures in Pennsylvania, to(cid:13) extend a trackage rights agreement with SEPTA for five(cid:13) years, and to participate in civic and charitable affairs in(cid:13) the state. As to the community most affected, the Board(cid:13) responds that it required NS to continue to address the(cid:13) needs of the Hollidaysburg/Altoona area and help to ease(cid:13) the community’s loss by seeking alternative economic uses(cid:13) for the HCS property as well as continuing efforts to(cid:13) maintain operations at the nearby JLS.(cid:13) Admittedly, the requirements that NS assist in the(cid:13) Hollidaysburg/Altoona area are vague, and there is no(cid:13) assurance that they will even partially make up for the loss(cid:13) of the HCS. But it is not our function to decide what steps,(cid:13) if any, should have been required of NS. Instead, we are(cid:13) limited to reviewing that which the Board did, and we(cid:13) cannot hold that the Board’s determination that the(cid:13) financial difficulties in which NS found itself, the general(cid:13) worsening of the economy, and the absence of work at the(cid:13) HCS were not adequate reasons to permit NS to make the(cid:13) management decision to terminate operation of the HCS.(cid:13) The Board was obviously entitled to consider the economic(cid:13) condition of NS because the survival of NS as a viable(cid:13) enterprise has an impact on factors the Board is statutorily(cid:13) obligated to consider, such as the merger’s effect on the(cid:13) adequacy of transportation available to the public and the(cid:13) effect of the merger on competition between rail carriers. 49(cid:13) U.S.C. S 11324(b). Moreover, although public interest is a(cid:13) factor to be considered in the Board’s decisions, that(cid:13) interest can extend beyond the boundaries of any one state.(cid:13) The final issue to which petitioners direct their fire, and(cid:13) one that also elicited the concern of a Board member, is a(cid:13) legitimate one and goes to the heart of administrative(cid:13) agency decisionmaking. The petitioners, citing decisions(cid:13) from this court, the Supreme Court and learned treatises,(cid:13) argue that agencies must apply consistent standards and(cid:13) principles to insure the fairness of the administrative(cid:13) process. See, e.g., Chisholm v. Def. Logistics Agency, 656(cid:13) 20(cid:13) F.2d 42, 47 (3d Cir. 1981) (observing "agencies[acting as(cid:13) quasi-judicial bodies] . . . have an obligation to render(cid:13) consistent opinions and to either follow, distinguish or(cid:13) overrule their own precedent"); Greater Boston Television(cid:13) Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1971) (observing(cid:13) "an agency changing its course must supply a reasoned(cid:13) analysis indicating that prior policies and standards are(cid:13) being deliberately changed, not casually ignored"); Atchison,(cid:13) Topeka & Santa Fe Ry. v. Wichita Bd. of Trade, 412 U.S.(cid:13) 800, 808 (1973) (noting that agency has "duty to explain its(cid:13) departure from prior norms"); see also II Kenneth Culp(cid:13) Davis & Richard J. Pierce, Jr., Administrative Law Treatise(cid:13) S11.5, at 204 (3d ed. 1994) (noting that agencies that fail to(cid:13) adequately explain their departures from precedent act(cid:13) arbitrarily and capriciously).(cid:13) Petitioners argue that in this case the Board failed to(cid:13) render consistent opinions, as, according to them, Decision(cid:13) No. 198 is not consistent in either tone or result with(cid:13) Decision No. 186, rendered four months earlier.(cid:13) At least one commissioner expressed some concern about(cid:13) the manner in which the Board interpreted its(cid:13) representations clause. Vice-Chairman Clyburn commented(cid:13) at the conclusion of Decision No. 198 that "the Board(cid:13) should be clear on how it views the nature of the(cid:13) ‘representations clause.’ "5 He asked whether this clause(cid:13) _________________________________________________________________(cid:13) 5. Vice-Chairman Clyburn’s relevant comments read:(cid:13) Is [the representations] clause a catchall phrase stating merely a(cid:13) goal for which to strive? Does it indicate a hard and fast rule to be(cid:13) interpreted literally, with no exceptions or consideration of(cid:13) extenuating circumstances? Maybe the interpretation of the(cid:13) representations clause depends on the specific wording of the(cid:13) representation or the context in which it is given. Further do we(cid:13) generally afford more flexibility to representations regarding matters(cid:13) of the operating plan or long term expenditures (because of the(cid:13) tentative nature of such projections), yet are more strict in our(cid:13) construction when dealing with specific services to particular(cid:13) customers? While I understand the conclusion the Board reaches in(cid:13) this difficult case, the Board, particularly in light of the importance(cid:13) of merger issues in this new paradigm, should give more guidance(cid:13) on how it interprets its own ordering paragraph.(cid:13) Decision No. 198, slip op. at 9.(cid:13) 21(cid:13) was "a catchall phrase stating merely a goal for which to(cid:13) strive?" or whether "it indicate[s] a hard and fast rule to be(cid:13) interpreted literally, with no exceptions or consideration of(cid:13) extenuating circumstances?" Vice-Chairman Clyburn did(cid:13) not disagree with the conclusion reached, stating that he(cid:13) understood "the conclusion the Board reaches in this(cid:13) difficult case," but stated the Board "should give more(cid:13) guidance on how it interprets its own ordering paragraph."(cid:13) We agree. We note that the new merger rules, updated(cid:13) June 7, 2001, which Commissioner Burkes had hoped(cid:13) might help to resolve the Board’s interpretation of(cid:13) representations conditions, fail to provide much assistance(cid:13) in this respect. The Board characterized the new rule as a(cid:13) codification of its current practice. It provides that the(cid:13) Board will oversee parties to a merger for a minimum of five(cid:13) years, requiring them to present evidence to the Board on(cid:13) at least an annual basis "to show that . . . the applicants(cid:13) are adhering to the various representations they made on(cid:13) the record during the course of their merger proceeding(cid:13) . . . . During the oversight period, the Board will retain(cid:13) jurisdiction to impose any additional conditions it(cid:13) determines are necessary to remedy or offset adverse(cid:13) consequences of the underlying transaction." Major Rail(cid:13) Consolidation Procedures, STB Ex Parte No. 582, 2001 STB(cid:13) LEXIS 546, at *86 (STB June 11, 2001).(cid:13) Although we recognize this may be an inadequate(cid:13) response to Vice-Chairman Clyburn’s concern and to that(cid:13) expressed by petitioners in this case, given the limited(cid:13) review that we have over agency decisions, and particularly(cid:13) decisions of the Board which has the responsibility over the(cid:13) complex issues that arise with mergers in the troubled state(cid:13) of the railroad industry in this country, we cannot overturn(cid:13) its decision in this case because we conclude it was neither(cid:13) arbitrary nor capricious. We note, however, that a more(cid:13) comprehensive analysis and explanation for the reasons for(cid:13) what appears to be its change of position would have been(cid:13) welcome and might have helped to reconcile the affected(cid:13) parties to the ultimate result.(cid:13) 22(cid:13) IV.(cid:13) CONCLUSION(cid:13) For the reasons set forth we will deny the petition for(cid:13) review. The stay imposed by this court will be lifted.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 23
